Attorney general on the lookout for price gouging

Restrictions on excessive price gouging state that a person cannot sell any product at a price that's more than 20% higher than what they paid for it as of March 9. Photo by iStock

Two Rockford companies are among more than 1,600 companies cited recently for price gouging in Michigan.

Frequency Apps Corp. and Biores Technologies Inc. were issued a cease and desist letter last Tuesday, March 24, after marketing to consumers the “Coronavirus Defender Patch,” which, according to the Michigan Department of Attorney General’s office, the companies claimed the product would “help aid the immune system to defend itself against exposure to the virus,” and “can help lessen the effect of the virus if you already have (it).”

Per the attorney general’s office, the patch was priced at $49.99, but the companies stated that consumers could receive a 30-day supply of the patch for free when they buy a 45-day supply of any patches the companies sell.

The patch was noticed by an individual who sent a letter to the attorney general. A copy of the letter was sent to the Business Journal. It reads, in part: “This company is providing misleading, unproven and likely illegal information regarding the effectiveness of their product on the virus. I am concerned this this could lead purchasers to have a false sense of security and to ignore proper safety methods to prevent the spread of the virus.”

That letter was sent to the attorney general’s office a few days after Gov. Gretchen Whitmer signed an executive order that placed enhanced restrictions on excessive price gouging, stating that a person cannot sell any product at a price that’s more than 20% higher than what they paid for it as of March 9, unless it is not an emergency supply and costs more than $1,000. The only exceptions to this are if they can prove that the price increase is attributable to an increase in cost of bringing the product to market or an extraordinary discount was in effect as of March 9, the order stated.

Robert O’Brien, a trial attorney at Miller Johnson, said this executive order was a forewarning to anyone who is looking to profit from the crisis because the Michigan Consumer Protection Act, which has been around for decades, has been the legal protection for consumers who may fall victim to prices of goods that grossly exceed the same goods that are found at other locations.

“I think the executive order was more along the lines of just a warning to retailers and businesses that they need to be mindful of the law and the law protects individual consumers in allowing them to get the goods that they need at prices that are fair,” he said. “If the retailers are taking advantage of the pandemic and charging a ridiculous amount for toilet paper, the government is just letting them know that they are on notice that we are going to take this seriously.”

Despite the warning, Ryan Jarvi, press secretary for the Michigan Attorney General’s office, said there were a total of 1,657 complaints related to price gouging involving COVID-19, including 684 complaints filed electronically through the office’s Consumer Protection website and 973 complaints taken by telephone as of Wednesday, March 25

Jarvi said the majority of call-in complaints appear to be about brick-and-mortar stores in the Lower Peninsula, though they’ve had some from the Upper Peninsula as well, and others that involve online marketplaces.

“Toilet paper, cleaning products, hand sanitizers and those types of items seem to frequently be subjects of price-gouging complaints,” he said. “Others that I’ve noticed to appear fairly regularly include bottled water and food items like hamburger meat, chicken and milk.”

Although there are complaints of price gouging, there is at least one Michigan grocer that is giving away a free item. Dave Sears is the owner of Fresh Coast Market in Traverse City. The grocery store is a 6,000-square-foot specialty store, which includes a café and gourmet deli section. He said there has been an increase in foot traffic since the pandemic was declared. Sears said since there has been a shortage of toilet paper in other stores, Fresh Coast decided to order more toilet paper and give it away for free.

“We don’t sell a ton of toilet paper in our store on a regular basis in the winter,” he said. “We ordered a two-month supply (earlier this month). I didn’t even think I would get it or it would come as yet, but I got it and within a day and a half they were gone, even with putting a limit of two. They were all the same price, but we limited it to two and every single consumer walked out with two rolls and I thought ‘this is crazy.’ As we all thought ‘Why are people hoarding toilet paper?’ We kept seeing that everyone is out of toilet paper so we decided that if there is a need and people are out of toilet paper and they need it because they can’t find it, we’ll give them away. We were able to give out 200 rolls of toilet paper. There is a convenience store that is close to us and I heard they had locked their bathroom door because people are stealing their toilet paper. There is a need for toilet paper, and we will still be giving them away.”

The Grand Rapids Business Journal reached out to Frequency Apps Corp., but representatives did not reply before press time last week.

Danielle Nelson is a Grand Rapids Business Journal/Grand Rapids Magazine staff reporter who covers education, travel and tourism, hospitality, law, startups, agriculture, sports, marketing, PR and advertising and arts and entertainment. She is also the staff researcher who compiles the weekly lists. Email Danielle at dnelson at grbj dot com. Follow her on Twitter @Dan_Nels

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